Urban landscape owes a lot ot the banks

Opened in 1822, the Bank of Montreal is Canada's oldest bank. If it gets through the covid-19 financial disaster without touching its dividend, it will have gone 198 years without ever being forced to reduce its dividend. An enviable record but one that is not out-of-place in the Canadian banking world.

Buy a home and you may well find yourself dealing with one of Canada's big five banks. Housing and banking is a partnership with deep roots. But any big personal expense may send a Canadian to visit a bank. Banks are seen by many Canadians as almost a friend. Always there offering support in tough times.

But Canadian banks do more than just loan money. For instance, the Bank of Montreal has a very successful ETF investment arm. When a Canadian is born, the little baby may be given an RESP or Registered Education Savings Plan. During one's life, a Canadian may well save for their senior years by putting money aside in an RRSP or Registered Retirement Savings Plan. And when a Canadian dies, it may well be a bank that acts as the executor of the will.

Compared to U.S. banks, in size Canadian banks would be rated among the largest regional banks in the States. With a market capitalization of only $43.4B Cdn., about $32B U.S., BMO is dwarfed by the immense size of big U.S. banks like JP Morgan Chase with a market capitalization of about $336B U.S.

So, why are Canadian banks so successful? Many claim it is because the Canadian banks operate in a highly regulated environment which is much different than that found south of the border. On the surface all the regulations don't seem to work in the Canadian banks' favour. For instance, according to Morningstar the Canadian banks are forced by law to hold more risk on their balance sheets that their U.S. counterparts. But this, some argue, forces Canadian banks to act more fiscally responsibly.

The future of banking in Canada may be different than the history of banking in Canada. U.S. banks are trying to make inroads while Canadian banks are expanding south of the border. How these actions will play out is a big question with the role protectionism will play in the unfolding story an immense grey area.